The Estate Planning Thread

Parent Cafe
201

No offense Attorney Mother, you have been very encouraging.

That’s where my conundrum comes from. To this point, I have been doing just that, but we’re coming to a place and an age where we can afford good legal advice and probably need it. I doubt that our offspring will be as DIY as I am. Those other professionals I mentioned make a great living and built a franchise based on quality and trust and have a backlog based on their reputations without squeezing every last dollar out of their clients. I just can’t figure out why it’s so hard for me to find an estate planning attorney who has a similar approach.

202

How hard is it to set up a living trust and transfer your house to it in California?

All my bank and retirement accounts are transfer-on-death so those are already taken care of, the only other asset is the house. I’ve seen the Nolo Press book and it doesn’t sound that difficult to set up a trust and xfer the house to the trust. LegalZoom will prepare the trust and the documents to xfer the house into the trust for $500 or so. Nolo says hiring a lawyer to do it costs around $2000.

Is this something a person could tackle on their own? I’d hate to spend $2000 if all it involves is filling out a few boilerplate forms, but I don’t have a way to gauge how risky it is to do it on my own.

203

@mikemac‌

I will only address some matters you may want to consider:

(1) if your house is still subject to a mortgage, check with your mortgage lender whether it consents to a conveyance of the house’s title to your LT – you do not want to cause a technical default

(2) regardless of how you go about setting up your LT, you need to understand how it operates going forward and after your demise – so if you DIY, make sure that the trustee (be it you, your spouse or a third party), trust beneficiaries, heirs, all understand what you have prepared

(3) make sure you actually complete the conveyance of your house’s title to the LT – this will require a valid recording of the deed in the property records – you will want to make sure this is done correctly so that the very purpose of conveying your property to the LT is not thwarted or clouded by any mistake – for example, in the property description

LTs typically also address other issues concerning the management of your assets if you are disabled and the disposition of your estate, so those issues are all subject to your direction and decisions.

I believe upthread a poster reported that she was pleased with one of the DIY websites. Perhaps she can chime in with more information.

204

I used LegalZoom to do a trust for my parents and it has worked fine, Dad died, I am the trustee and have had no problems. One Caveat Emptor, though, I have worked in a financial field for many years so have above average experience with estate planning rules & needs, though no one is an attorney, we at least knew the questions to ask.

205

Copying this post from the Retirement Thread here:

Also, make note that anyone moving/transferring IRAs in 2015 and forward, there is a new rule limiting those moves to one per year UNLESS they are trustee-to-trustee transfers or conversions from IRAs to Roths:

http://www.irs.gov/Retirement-Plans/IRA-One-Rollover-Per-Year-Rule

206

Cautionary story here: Just spoke with attorney friend last night about friend of his, a wealthy and financially-sophisticated businessman (whom he did not identify, obviously).

H and W had approx $3 million in liquid assets in one brokerage account, held JTWROS. TOD arrangements in place – primary beneficiary to spouse (technically unnecessary) and secondary beneficiaries = 2 daughters 50/50.

Wife died in 2012, H got title of account transferred to himself in accordance with JTWROS.

H just died. No TOD in place for NEW brokerage account because prior TOD arrangement does not / did not attach to new account. Poor housekeeping by broker. H was a rugged individualist who did not have much use for lawyers and he made and managed his own money.

Brokerage account (without TOD) will now descend according to the will H drew up approx 15 years ago. Bequest to W’s in will says if she predeceases him, her share will go to her mother for her support. W’s mother still alive and infirm. If W’s mother inherits, she has other children eager to share in potential bounty. H&W’s two daughters stand to lose approx $1.5 million between the two of them.

From the sound of things, neither H nor W wanted the brokerage account to go to anyone other than daughters upon their deaths. Abysmal result caused by an “oversight” and poor planning. H probably thought all paperwork was in order. There is discussion of suing the broker.

The amount involved will no doubt fuel litigation. My attorney friend says there is nothing he can do to help the daughters who wanted to know why their father did not put them in as beneficiaries –
couldn’t they they “cross out the names and fix them”? They were completely in the dark about parents’ estates. All my friend can do is to refer them to lawyer who is expert in estate litigation. He has known these girls since they were in high school. They now face a potential lawsuit involving their grandmother and aunts and uncles, whom they barely know.

It’s a very unfortunate situation.

207

@AttorneyMother That is a great cautionary tale. I manage money for a living, and every so often I go through retirement accounts and make sure the client’s beneficiaries are up to date. People are amazed when they find their ex-spouse is set to receive 100% of their SEP IRA, or that the son that has been written off is a 50% beneficiary. Situations change, often drastically, so keep those financial records up to date people!

208

Indeed, @Parent1337‌
It’s important to do that and any time there is a birth, death or change in family situation. Imagine if one had named one’s grandchildren by name, and more were born at a later date. Those children would be out.

I don’t know those young women, but I have been thinking about their situation. If they sued the broker, the success of which is extremely unlikely and the statute of limitations is running, it is an hideous family situation. They will be characterized as taking money away from their infirm grandmother.

In my family’s experience, which I have sprinkled throughout this thread, I learned that my FIL’s broker for the large “trouble” IRA (that I’m still dealing with), handwrote his answers and only filled in the primary beneficiary. no secondary beneficiaries were identified, although FIL would clearly have named his two sons if his other accounts were any indication. This company sends monthly statements and annual statements (piles of them), but no where on any of these statements are the beneficiaries listed on the account confirmed. I only confirmed the identity of the sole beneficiary by going to a successor broker (original one was no longer with the brokerage) and obtained a photocopy from his office. That was an ordeal by itself. My FIL was an extremely responsible person with his accounts, but this particular item was just not on his radar screen. And, they had actually gone through estate planning and had documents prepared.

I know that at least Vanguard and Fidelity send annual statements.

209

Yes, both vanguard and Fidelity send me letters to confirm beneficiaries.

I hope I am okay in thAt I put my Trust as beneficiary, as I redid Trust a few years ago.

210

@bookworm‌ – this is very GENERAL information to raise some issues:

As I understand it, whether one ought to name a trust as the beneficiary of an IRA DEPENDS on whether:

(1) you intend for the trust to receive the IRA’s distributions (which are taxable as income when they come out of the IRA) and then be disbursed through the trust to the trust’s beneficiaries, or
– because the beneficiary is NOT an individual, there are specific post-death distribution rules required by the IRA (see IRS Pub 590-B)

(2) you intend the individual beneficiaries of the trust to be able to divide the IRA and each receive a “piece” of the IRA intact – this allows the inherited IRA to pay out in accordance with the individual’s life expectancy

These ARE different outcomes, with (2) above as the better option for most people. I suggest that you make sure you have properly considered what objective you wish to achieve.

Here are some links:

http://www.bankrate.com/finance/retirement/naming-trust-ira-beneficiary.aspx

And you can check this Ed Slott link also:

https://www.irahelp.com/slottreport/think-twice-naming-trust-ira-beneficiary

There are also IRS private letter rulings that have addressed the topic but it’s better to plan things properly rather than leave your heirs/beneficiaries to sort things out.

211

@AttorneyMother‌

I was thinking the same thing. It is not really the broker’s role to make sure beneficiaries are spelled out in a new non-retirement account. It would be common sense, or a gesture of a caring broker, to suggest it be done, but I don’t think it is a duty per se. Retirement accounts come with a beneficiary form when you open the account, and the new account owner will be hounded to fill that out by the brokerage. Another gray area in my practice are Profit Sharing Plans and the like. Beneficiaries are spelled out to the plan administrator, which can be a sharp professional group, or in the case of smaller plans, it may be a single doctor taking care of things for a practice. For one client, the administrator was “the blue book.” The original veterinarian in the practice started the plan years ago, but he had died. The plan in the blue book stated that beneficiaries are to be designated to the plan administrator?!?!? It turns out that none of the six doctors had ever specified beneficiairies to anyone. Now, they at least have a page in the blue book where beneficiaries are listed.

212

@Parent1337‌

I am not familiar with the professional duties of money managers and brokers, so I cannot address that. I agree that it is each generally account owner’s responsibility to make sure that things are properly done and, if one goes the DIY route, to make sure that nothing is overlooked or suffer the consequences. The unfortunate thing about egregiously erroneous steps in estate planning is that, unlike lifetime transactions, one’s mistakes aren’t uncovered until you are out of the picture and incapable of taking any corrective steps.

Employer plans are only as good as the administrator. It’s a good thing generally if they are administered by big institutions like Fidelity, Vanguard or Schwab, etc. But, the HR department is often the weak link because employee forms are administered there. Not to mention the potential for error if one takes “advice” from co-workers who are not experts. And, really, who is expected to be? The rules are complex so employers’ plans are typically fairly rigid.

“Retirement accounts come with a beneficiary form when you open the account, and the new account owner will be hounded to fill that out by the brokerage.”

I think from a practical standpoint, what happens is the form is provided and it’s up to the account owner to submit it on a timely basis. There might be a cursory glance to make sure that the blanks are filled in and signatures are proper.

213

Interesting situation in post #205 @AttorneyMother, I hope you’ll be able to keep us posted on how things turn out. I didn’t realize that when one joint account holder died a whole “new” account would be created for the survivor. As originally set up, the husband and wife were joint account holders and their daughters listed as beneficiaries when both parents passed. If it is required to open a new account and re-designate beneficiaries after one account owner dies, then the only way the original intent of the beneficiary designation could be honored is if both account holders died simultaneously. This doesn’t seem right, and I doubt that’s how most people anticipate their TOD instructions are implemented. Do brokers have a fiduciary duty? It seems the parents of the girls did not have their wishes honored.

On the other hand it is good that the woman’s mother will have support at the end of her life, as it seems that was also important to the woman who passed away. Perhaps she will leave the rest of the money to the granddaughters, or perhaps they will just come away with an expensive lesson in estate planning plus $750,000 each- still a generous bequest.

214

I dunno, momsquad, if my estate reverted to an out of date designation, probably made when I thought my mother would use the money to raise my small children and instead my hard earned assets were squandered on Mom’s care (sounded like Mom already had care set up) and then went to disrespected siblings instead of my kids, I would be spinning in my grave. That is way too much money for an object lesson and if the the deceased’s kids don’t know those aunts and uncles, then the deceased probably did not have much use for their own siblings.

215

@momsquad‌

I doubt that I will have any further information about how things are resolved. My friend mentioned the situation only because he was asking me how things have progressed on my end with the settlement of my ILs’ estates and because I had been chatting about that and asking him about personal estate planning things.

I think that it’s safest to deal with each “new” account as a separate asset. At some institutions, it’s possible that the TOD or beneficiary designations migrate or encompass everything that each account holder owns, but that may also not be the right result for everyone. I recall some years ago that Vanguard was on the receiving end of an outcry when it announced that it would only allow one blanket beneficiary designation for ALL accounts owned by an owner. That result itself may not reflect what everyone intends.

The key is that your planning, designations and documents all reflect (to the best they can), your intent.

Also, because TX is a community property state, the original JTWROS account contained the W’s community interest. It’s possible she could have intended that her community interest descend to her estate (via her will), but it was extinguished because it was a JTWROS account and the entire account went to the H by operation of law. The only way the outcome might have been different at the time of the W’s death would have been if someone had sued to get a different outcome. It’s very possible there is case law on how there might have been a different outcome based on different facts. The bottom line: I don’t know the answer and only an expert who is well-versed on the law in your state can advise in your (not you, but everyone’s) situation.

You may recall that I mentioned my FIL and MIL died within 2 days of one another. There are also complications in these close-in-time dates. Most states have simultaneous death statutes so that only one decedent’s will need be probated or your will can specify a time limit before someone can inherit. However, nothing in anyone’s will can affect beneficiary designations.

It’s my understanding in the case I described that the GM’s other children are very interested. If GM dies intestate (no idea if that’s the case), her children would inherit what’s left over in GM’s estate. If GM has a will, her will governs. She is infirm – I don’t know if that means she is not mentally competent to execute a new will. I cannot see how the two daughters can go visit GM and present her with a favorable will! That’s untenable. GM is under no obligation (and hence there is no way to know) if she will set things up so that the leftover funds will revert to the two daughters.

It’s a mess.

216

Adding this here: good article about “inheritance” (as opposed to estate) planning:

http://www.financial-planning.com/news/estate_planning/estate-planning-for-unequal-divisions-2690878-1.html?zkPrintable=1&nopagination=1

217

@AttorneyMother, how do I post a PM? I have answered a couple, but I don’t know how to start one. I am hoping I can pm you for some directions on how to look up some estate planning information. Thanks.

218

Yep, lots of landmines in estate planning.

219

I guess the key thing is, once things are in place, to review as things change.

I was just thinking about our life insurance policies - now that our DDs are adults, we can name them as beneficiaries instead of the trust.

TN SIL overlooked one of her mother’s life insurance policy with her father named as a co-beneficiary (he predeceased his wife). Had to have an attorney get involved to file some paperwork to finish through probate.

We are still consolidating things. We do have an elder lawyer in town who is one of two with these specific credentials in AL. I know I will get forms and things from her paralegal to prepare for appt. On the to do list. Want to have everything in order.

@classicrockerdad - although it seems you may have some legitimate concerns leading you to feel like you do about attorneys, etc., you sound like the engineers in our town that critique the MDs; I have seen some engineers that have been quite harsh towards MDs and very distrustful which has had unfortunate consequences with adversarial relationship or just not listening to MD advice. Certainly you have people that you can ask as to who they use for their legal work. If you ask enough people you know, surely some names are going to keep popping up. Of course if you have your information organized and you can step through it quickly with the chosen attorney - you probably can minimize the time (and legal expense).

When we were expecting our first child, an attorney and his wife were in the same pre-natal class with us, so we used him for our wills. Pretty simple and straightforward. We knew my sister would raise our children if something happened to both of us, and my brother would help manage the money for her.

Somehow we had some kind of a connection with a smaller law firm, and used a lawyer there for something - we liked him and his firm. It turns out when I was going to purchase a business (and a building) I continued with that attorney even though he moved to a bigger law firm (and one of his partners that handled a lot of real estate did that document). The deal could not go forward due to something we discovered, but we were happy with the services.

Before the inheritance amounts were raised, my parents had an A/B trust set up in WI. It worked beautifully. Attorney did a great job. We closed out the trust after parents’ home sold last year.

For those two young adultsvmentioned by @attorneymother, maybe the grandmother can process something to turn over the $$ to these intended heirs, and the others will sign away any rights to the money.

220

@SOSConcern‌

Thanks for sharing your experience.

As for the two young women in the situation, the key word in your post is “maybe.” The GM could do something to right the “mistake” but there is no legal obligation on her part to do so. And her capacity to make a new will may itself be suspect at this time. The way I understand it, there is no way the two young women can take steps to unwind the series of legal events set in motion by their father’s death short of legal action. Their alternative recourse is to sue the broker perhaps, but, as we discussed, that is quite unlikely to succeed because there was no wrongdoing. An oversight occurred, but it is unlikely to be characterized as a breach of some duty. It’s not a situation where the broker sold unsuitable investments products or engaged in self-dealing.

Even if they want to pursue their case, it is a situation that can / will cause a great deal of discord in their extended family because they will be characterized as suing to renege on a bequest their own mother (appeared to have) wanted to provide their GM, even if we outsiders think we “know” otherwise. I can imagine one of the witnesses might be the broker who did not pin the father down to get a beneficiary designation for the new account. I doubt that he’d be a friendly witness if the girls also wanted to accuse him of some form of negligence.